The USA announced the most aggressive trade sanctions on Friday oil her of Russiajust ten days before o Joe Biden to leave the White House for Donald Trump to take the presidency in his place, according to the Bloomberg agency.

If they remain in place under Trump, the measures are more likely to disrupt Russia’s oil exports than anything done by any Western power to date.

Two major producers and exporters have been sanctioned, a highly effective program to target individual tankers has been dramatically expanded, traders arranging hundreds of cargoes have been blacklisted, key insurers have been named and two US oil service providers have been ordered out.

Surgutneftegas and Gazprom Neft

The imposition of sanctions on these two Russian companies is by far the most immediate and aggressive step taken so far by Washington or any other Western country.

The two companies will transport about 970,000 barrels of oil per day by sea in 2024, and being targeted will be a cause for concern for refiners in India as well as state-owned companies in China.

To put their sea flows into context, they are larger than the global oversupply the International Energy Agency predicts for the world market in 2025. They are also nearly 30% of Russia’s sea exports.

No one is suggesting that the two companies’ shipments will stop altogether, but the fact that they have been sanctioned, along with the other measures announced, means that oil market disruption cannot be ruled out.

Oil tankers

The US also announced sanctions on about 160 individual oil tankers.

This doubles the total number of ships targeted by the US, UK and EU to date. Around 30 of the ships targeted by Washington have already been sanctioned by London and Brussels, but it is important to note how effective the US measures have proven so far.

Of all the sanctions on Russia’s oil trade, those imposed by the US have proven to have the biggest impact, proving that Asian buyers are wary of ignoring Washington’s measures.

Before Friday, the Office of Foreign Assets Control (OFAC) had named 39 tankers carrying Russian oil since October 2023. Of those, 33 had failed to carry cargo since they were registered, according to vessel tracking data it collected. Bloomberg. This is a higher level of disruption than is achieved by similar measures imposed by the UK or the European Union, with the first sanctions imposed by those two jurisdictions not coming until June 2024.

The latest measure includes sanctions against the entire fleet of specialized tankers used to transport oil from key points in Russia’s Arctic and Pacific regions. Arctic ships carry cargo to the Russian port of Murmansk, where two tankers have also been targeted and may not feel the immediate effects. But the sanctions could affect ship maintenance, which is usually done in China.

Tankers operating in the Pacific carry Russian oil to China, and sanctions could complicate that trade, potentially requiring cargo to be moved from one tanker to another before delivery.

Traders

OFAC has also targeted “opaque traders seeking to transport and sell” Russian oil, who “often have shadowy corporate structures and personnel with connections to Russia and conceal their business activities.”

Many of these trading companies were established after Russia invaded Ukraine in 2022, and several of the first new companies have already disappeared, to be replaced by new entities, with overlapping owners and many of the same executives.

Actions taken against current oil traders will probably create some short-term disruption, but it is likely that many of them will re-emerge under different names.

Ship insurance

Sanctions on two of Russia’s largest oil tanker protection and indemnity insurance providers, Ingosstrakh Insurance Company and Alfastrakhovanie Group, may not have a major impact on flows.

However, banning these two companies from providing insurance may effectively push some tankers, including the Russian fleet, out of mainstream insurance markets. At least temporarily. This will add to the concerns already expressed by countries whose waters are already endangered by aging ships carrying Russian oil.

An important question will be the reaction of India and its oil buyers and regulators, since the country is a key recipient of deliveries insured by Ingosstrakh.

“The removal of Ingosstrakh from the market creates a void that will inevitably be filled by unreliable insurers,” the company said. He added that he would look at ways to deal with what he described as an “unwarranted and damaging decision”.

Oil services

The sanctions also require US oil services companies to cease operations in Russia by February 27.

At least two US-based global providers continued to work in the country even after the Kremlin invaded Ukraine, according to their quarterly reports.

But the broader restrictions are unlikely to have an immediate impact on Russia’s ability to pump oil, as domestic providers, including companies previously owned by foreign investors, carry out most of the country’s oil services. The former subsidiaries of the global oil service providers have retained enough equipment, personnel and know-how to keep up with Russia’s drilling rates.

Only about 15 percent of Russia’s oil drilling market depends on foreign technologies, Oslo-based research firm Rystad Energy A/S estimated a year ago. Any impact on Russian oil production is likely to be felt only in the long term.

Implementation and enforcement

Much of Russia’s oil trade has already been diverted from Western companies and service providers, undermining the effectiveness of the measures taken so far.

For sanctions to be effective, the new US administration will have to be willing to take action against buyers of Russian oil.

Indian refineries and those owned by the Chinese government have already shown reluctance to accept cargo carried by sanctioned ships. But that hasn’t cost them too much when blacklisted ships only make up a small percentage of the available shadow fleet.

The latest round of US sanctions is changing that picture, hitting more of the fleet.